Correlation Between Innovator Loup and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Innovator Loup and Goldman Sachs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Innovator Loup and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovator Loup Frontier and Goldman Sachs Innovate, you can compare the effects of market volatilities on Innovator Loup and Goldman Sachs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Innovator Loup with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Loup and Goldman Sachs.

Diversification Opportunities for Innovator Loup and Goldman Sachs

0.95

Correlation Coefficient

Innovator Loup  Goldman Sachs

Almost no diversification

The 3 months correlation between Innovator and Goldman is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Loup Frontier and Goldman Sachs Innovate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Innovate and Innovator Loup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Innovator Loup Frontier are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Innovate has no effect on the direction of Innovator Loup i.e., Innovator Loup and Goldman Sachs go up and down completely randomly.

Pair Corralation between Innovator Loup and Goldman Sachs

Given the investment horizon of 90 days Innovator Loup Frontier is expected to generate 1.87 times more return on investment than Goldman Sachs. However, Innovator Loup is 1.87 times more volatile than Goldman Sachs Innovate. It trades about 0.23 of its potential returns per unit of risk. Goldman Sachs Innovate is currently generating about 0.19 per unit of risk. If you would invest  4,525  in Innovator Loup Frontier on September 15, 2024 and sell it today you would earn a total of  1,115  from holding Innovator Loup Frontier or generate 24.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Innovator Loup Frontier  vs.  Goldman Sachs Innovate

Innovator Loup Frontier

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Loup Frontier are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Innovator Loup reported solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs Innovate

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Innovate are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovator Loup and Goldman Sachs

The main advantage of trading using opposite Innovator Loup and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Loup position performs unexpectedly, Goldman Sachs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.

The idea behind Innovator Loup Frontier and Goldman Sachs Innovate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.